The Bank of England’s base rate is the official interest rate that banks and building societies use to determine interest rates they offer for mortgages and saving accounts. The current BoE base rate of 0.50% was increased from 0.25% in November 2017, marking the first time it had risen in a decade. While some are only just feeling the effects of this rate hike, there are already talks of not one, but two rate increases in the remaining months of 2018.

This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

Reason for the rise

After narrowly missing a rate hike in March, the Monetary Policy Committee (MPC), who meets 8 times a year to determine the rate, is now making aggressive predictions about the market for the rest of this year.

The MPC is anticipating a change in inflation to below 2%, which would result in two 0.25% increases, bringing the base rate up to 1%.

However, after the BoE Governor, Mark Carney cautioned against the surety of a rise in May, the market seemed to take a turn and inflation dropped to 2.5%, the lowest it had been in a 12-month period. As a result, expert predictions for the chance of a hike in May dropped from 70% to 40%.

Two increases in the later months of 2018 comes as a surprise to many experts.

After the rate rise in November 2017, the markets modestly predicted one increase in 2018 and another in 2019.

There has been no clear indication why the MPC feels that the rates need to increase more quickly and before originally forecasted, making the bold predictions slightly baffling.

However, there is a small glimmer of hope – the second increase is more tentative than the first and will be heavily influenced by the rate of inflation.

Take Action

With multiple rate hikes looming on the horizon, now is the perfect time to secure a mortgage. Once the new base rate is in effect, banks will most certainly be passing on the extra costs to customers. So now is the time to lock in a fixed rate deal that will guarantee lower payments for as long as possible.

If you want to take advantage of the current low base rate before it’s too late, speak to a mortgage adviser. We can ensure you and your finances are ready for the mortgage application process and help you find the provider that’s right for you and your needs.

Dental & Medical Financial Services have been helping doctors and dentists with finding low-cost mortgages for your home and investment properties for over 25 years. Call Chris to discuss your options.

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